At 9:42 am on February 12th, I received an email alert from one of my trade architects. My trade architects are the people whom I pay to scan the markets every day in search of the ultimate trades; great technical trades that allow me to maximize my risk reward scenario.
This my top performing architect’s service. The 2/12 email alerted me to unusual buying on Time Warner Cable (TWC). The stock was trading at 179.95.
We set up the trade and that day, TWC closed at 184.99. By March 1st, Time Warner Cable had reached 194, a 7.8% gain in just a couple of weeks.
So what fundamentals were used for this trade? None… except…following Smart Money. For example, I have Fios, a bundled Internet access, telephone, and television service that operates over a fiber-optic communications network to over 5 million people in 13 states. Fortunately I live in one of those states. Why do I have Fios? I hate Time Warner Cable, and canceled them years ago.
It doesn’t matter though, because the Smart Money indicated a bullish move. Here’s another example; I drink Dunkin Donuts coffee, but I’m happy to trade Starbucks if I can make money from it. I follow the Smart Money.
So what is the Smart Money? Smart Money is when the professional traders step up and make a big play. These are the billion-dollar companies that spend millions on research to give them any edge they can get. In the Oscar nominated film, The Big Short, the protagonists are seen traveling to areas of the country that have been hit hardest by the sub-prime mortgage to see (for themselves) how bad the damage is.
They act as prospective buyers and look at houses with brokers. They interview mortgage lenders about their practices. They make it their job to know everything there is to know before making a financial decision. Then, the Smart Money wants to get paid for their research, so they make a big play. They risk millions to make tens of millions or more.
That’s where we come in. You see, the biggest tell is when there is no public news and you see a huge spike in volume that can be double, triple, quadruple or more above the normal interest in the stock.
As these are the big players, they put more money into the trade and we get to follow their lead. Take Natural Health Trends Corp. (NHTC) as an example.
On February 18th, our Smart Money Elite Service, lead by Christian Tharp CMT, produced a report that NHTC had a 21.84% increase in institutional ownership over the prior quarter. That’s huge activity.
On 2/18, we targeted entry at 30. On 2/22, we exited the position at an average price of 35.90. That was good for 19.7% in four trading days.
At the time of the trade, I didn’t even know what the company was…or specialized in. After that kind of move, I took a look at the rest of the report and learned it was an e-commerce company that provides wellness, beauty and lifestyle products. Those extra details don’t move the needle for me, but it doesn’t matter because the Smart Money was buying; and the resulting move was much bigger than big name stocks like Facebook, Apple and Twitter in the same period.
Most people don’t have the time or inclination to do the kind of research that these billion-dollar institutions do. However, there’s no reason why we can’t benefit from their work… simply by paying attention.
This is where we pay attention. In my high school science class, there was one kid who was brilliant. I truly believe he could have taught the class. You know the kind of person I am talking about. As soon as he speaks, you realize he’s on another level.
Needless to say, I became his lab partner and I did much better than I should have in science. It was the smart move. Paying attention to what the billion-dollar institutions are buying and selling in heavy doses, is also the smart move and it can also become a very profitable move.
I hope this gives you the extra edge you have been looking for.
P.S. “Average people would rather be entertained than educated. Rich people would rather be educated than entertained.” – Steve Siebold Start Here.
Adam Mesh is CEO and Founder of The Adam Mesh Trading Group. For the past 18 years he has coached thousands of students to all levels of success in trading. He is also creator of the revolutionary Smart Money Elite